And if you haven’t seen this video yet, you need to watch it. Why should we trust the government to run health care? In the video you’ll a bureaucrat at the Federal Reserve not able to answer one question by the good Congressman about where 9 TRILLION off balance sheet dollars have gone. Hmmmm….I dunno, didn’t read the Bloomberg article. Oy vey.

Okay, now, with the current spending, the Fed has no idea where it’s going. It’s time to consider Congress itself. I always get a little amused watching these self-important buffoons lecture some minion about spending. Congress has it’s own problems. Here is a visual demonstration. Stick with this, folks:

Please go to Political Math this great blog I just heard about via the RNC. Yes, the RNC. Anyway, the blog has loads of videos illustrating what spending cuts mean to President Obama. It’s great.

California’s controller says he will begin a 30-day delay on tax refunds and other payments starting Feb. 1 because the state is running out of money.

The solution, of course, isn’t to cut spending, scale back on largess and live within one’s means. The solution is to print more money. Why won’t the Feds do this? Oh right, they are printing more money. They print it and now own the banks that house the money they print.

You know what’s great about this? We are becoming just like Europe. Maybe they’ll like us now.

Zombies. Seen one lately? If not, you may soon, because they are about to menace the U.S. economy. In financial lingo, zombies are debtors that have little hope of recovery but manage to avoid being wiped out thanks to support from their lenders or the government. Zombies suck life out of an economy by consuming tax money, capital, and labor that would be better deployed in growing companies and sectors. Meanwhile, by slashing prices to generate sales, zombie companies can drag healthier rivals into insolvency.

Sometime in the past few months, zombies went from being a latent risk to a genuine threat—one that is likely to increase in the months ahead. The Bush Administration has already ladled out billions of dollars in assistance to weak banks and automakers. As the economy goes into what may become the worst economic downturn since the Great Depression, the Obama Administration will come under even more pressure to prop up sick financial and nonfinancial companies to save jobs. The debate will center on wounded giants such as Citigroup (C), General Motors (GM), and insurer American International Group (AIG). Other sectors with their hands out include steel, airlines, retail—and homeowners, who may be the scariest zombies of all.

It will get worse. No one, it seems, wants to endure the pain that comes from undoing trouble that took a long time to create.

The fact that I can’t answer the question clearly after being told by everyone that the world was imploding is irksome. Either this financial crisis bad but we’ll make it, or it’s bad and it’s going to suck the economy down the hole. And why is consumer confidence up? I have an answer: gas prices are declining. Yes, it’s that simple.

Usually, constitutional issues prevent the Senate from acting on legislation that involves tax issues — any such bill must originate in the House. However, the Senate can circumvent the the rules by taking up a pending House bill, stripping it and putting in place substitute language. Senate Banking Committee Chairman Chris Dodd (D-Conn.) had cast doubt on that scenario after Monday’s failed House vote, saying it would only “compound” the situation, but others, such as senior Banking Committee member Robert Bennett (R-Utah), confirmed it was a leading idea.

“Anything that’s within the realm of the rules is within the realm of possibility,” Bennett said.

Some observers said a successful Senate vote could be an important tool in persuading wavering House members who may be considering changing their vote.

So Senators think there’s a problem and it’s bad enough to skirt the constitution to address it. Will someone please explain it to me? I would like something to happen so average schmucks don’t end up homeless–but that isn’t the Paulson plan.

Michelle Malkin is in the other camp and says,”Today’s stock market drop is a record point drop, but does not even crack the top 10 single-day percentage drops in American history.
Let’s stop pounding the panic buttons.”

Time Magazine explains some of the subtleties, but after reading the article, I get the impression that banks are being more sober about their lending. That, to me, is a good thing.

Some personal anecdotes:
When we started our business, no one, not one bank, would give us money. So, we had to use credit cards and roll our build out into our lease agreement. We bartered the painting and we did some of the interior work ourselves. We didn’t qualify for credit and we were a good risk (at least to us). About a year after we had signed our lease, the building owner had worked with our agent and had never met us. We looked so young, she was shocked. She would not have leased us space had she seen us. Good thing she didn’t see us!

When we bought our home, our agent found the most generous loan officer he could find. There is no question that he finagled a deal for us. Frankly, I was shocked we were loaned any money at all–we had copious student debt and no assets besides a diploma. It was an FHA loan. Everything worked out.

When we bought a bigger home, the bank approved us for more than we could afford. I was dismayed. And, after asking a million questions, we settled on an old-fashioned loan and bought a home within our means. But the process was confusing and there were many choices. An acquaintance of mine actually was lied to by the bank officer and signed a loan that increased in payments by $200/month within a year. The loan was changed and refinanced, but this was a person who understood finances and could pay. Predatory lending is not a myth.

Still, Americans are too used to living beyond their means. Needs are confused with wants. People believe that they must have cable and iPhones and dinners out and whatever is their personal passion. And now, people can’t make their payments? What happens then? Well, unfortunately, banks gave many bad loans to people who can’t pay.

Some people just need time. A reader of mine, 81 years old, lived through the Great Depression, and remembered that his family was given a year of interest only payments so they could keep their home while their father searched for a job. But joblessness was the problem then, it isn’t now. Yet.

Some people are buried over their heads because they lived beyond their means. Some businesses are the same. They will fail. The pernicious thing is that lenders had the government tighten up requirements filing for bankruptcy while they want money loosened as they themselves fail. It is this atrocious behavior that sickens Americans.

And so, as another reader wrote, “then let’s eat beans and rice” until it gets better. If Americans are willing to endure this, then why is the Senate voting to ostensibly stop it, if it can even be stopped? And should it be stopped, even if it can be stopped?

UPDATED:

Online bank runs, if there are any, don’t make the news because there are no lines and terrified man-on-the-street interviews. And that’s a good thing.

My natural instinct is to say that it’s good when new laws don’t get passed. Gridlock is a beautiful thing because laws tend to make the average person’s life harder. So the bailout plan failed. I should be ecstatic. Certainly, the vast majority of Americans didn’t really want this bill. So are they right? Time will tell.

Right now, the stock market is tanking. It will likely tank tomorrow. Now, it’s a psychological as much as a financial thing. People get stupid when they’re scared and that’s what makes me nervous.

90 Democrats voted AGAINST the bill. So don’t listen when the Dems blame Republicans for the legislation’s failure to pass. Only 12 Democrats needed to pony up for this.

Nancy Pelosi is a knucklehead. What a vindictive woman. It is called politics–as in care for the toes you step on because they are connected to the ass you have to kiss tomorrow. It’s called don’t insult the people you need to help you.

As I wrote in the comments, I have no idea why any particular member, or group of members, of the House, voted for or against the bill. All I’m saying is that if you are trying to rally the House to pass an emergency bill, you make it seem like there is AN ACTUAL EMERGENCY, which more or less precludes partisan attacks. To the extent any Republican voted against the bill because of Pelosi’s speech, it may not be a question of them being offended by her partisanship, but the perspective that if Pelosi thinks that the situation calls for partisanship, it must not be a serious emergency, because leaders simply don’t engage in such antics when a true emergency is at hand. For that matter, if I were a Democrat skeptical of the bill, Pelosi’s speech may have discouraged me from voting for it for the same reason.

On the other hand, maybe Nancy Pelosi isn’t stupid. Maybe she doesn’t want the crisis to go on and on, damn the American economy, damn small businesses. If you’re rich enough, low valued stocks are nice for making some money. She’s rich enough. Oh, and don’t forget that every day this crisis continues is more votes for Barack Obama. At least, Pelosi and Obama count on voters being that superficial. [Updated:Soren Dayton seems to agree with my hypothesis. Help us! I don’t know what the country will come to with politicians who filter every single defining moment through self-interest rather than what is in the best interest of the country. And Jeff Goldstein asks if Pelosi inadvertently helped America. That would be the only way it’d happen]

After sleeping tonight, Americans may face the consequences of their anger. I hope the populace is right. I fear a situation where people can’t pay their employees, who can’t pay their bills, where more homes are lost, which will exacerbate the problem. [Update: Are people already reconsidering? Or are people just confused? Are people finally understanding the implications of letting this slide could be disastrous? Or, do people, like me, hate all alternatives and figure something has to be done, just not what Paulson was proposing.]

You’d think The One at least could flip 12 Democrats by promising to swing by their districts while he’s on the road and turn some water into wine or whatever to help get them reelected. After all, if the polls hold, this is going to be his mess to clean up come January. Waiting only makes it worse. Grab a mop, Messiah. Click the image to listen.

And did Obama help things? No. Here’s how the Congressional Black Caucus responded:

More members of the Congressional Black Caucus, whose heavily black districts include many of Obama’s most ardent supporters, opposed the bill than supported it.

Few of these members are in, or will ever have, tough re-elections.

Obama, it seems, could have helped deliver some of these votes if he had been more invested in the bill.

Frank Luntz: “The taxpayers want someone hung and they don’t want it to be the taxpayers.”

Again, I will conclude with pain. Tomorrow, we wake up with it.
Updated: From Ron Paul (I know, I’m quoting and linking to Ron Paul)–

Yes, we need change, but the change we need is to get rid of the perverse government incentives for banks to make those bad decisions in the first place. But all we hear about is band-aids, symptoms, and bedtime stories about how this will fix everything.

It won’t and it comes down to this: You can save the banks that are failing, or you can save the dollar. But you can’t save both.